The Costs and Benefits of a Living Wage

Trust for London commissioned Queen Mary, University of London to explore the costs and benefits of a London Living Wage (LW), including examining workplaces before and after they introduced the LW as well as comparisons with workplaces where the LW was not paid. Over 400 low-paid workers were surveyed.

Key findings include:

Over half of employees (54%) felt more positive about their workplace once the LW was introduced and 52% felt more loyal.

Staff leaving rates fell by 25%.

Almost a third (32%) of workers felt it benefitted their family life by allowing them to do things like spend more time with family.

Almost 4 in 10 (38%) workers reported financial benefits such as being able to buy more goods and save more.

Reputational benefits to companies paying the LW were significant, including helping to attract new business/customers and in recruiting staff to professional roles.

Workers in LW workplaces had better psychological well-being than those in non-LW workplaces.

Wage cost increases associated with introducing the LW were 6% of the contract cost on average, despite low-paid staff receiving much higher increases in their hourly rate of pay (an average of 26%). The cost increase was mitigated through savings such as reviewing working practices, reducing management overheads and in some cases, reducing working hours.

Savings from reduced staff turnover (such as recruitment savings and reduced levels of sickness) were low and on average represented 0.3% of overall costs.

The London LW makes a significant difference to the disposable income of households that do not claim (or are ineligible to claim) welfare benefits and tax credits. The financial impact on those claiming these benefits and credits is much lower as the entitlements reduce as wages rise. The introduction of Universal Credit will improve this situation.

If all low-paid Londoners were paid a LW this could save the Government £823 million per annum by increasing the taxbase and reducing welfare benefit spending.

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Summary Report